Essay on The Next Depression - 1435 Words

The Next Depression Fast money, that is what a large percentage of Investors want. We are in the midst of the largest bull market ever, and the greatest financial expansion in history. What goes up must come down, right? This fundamental rule seems to not apply in today’s fast paced economy. This remarkable wealth-making machine seems unstoppable, but is it? One cannot help but be reminded of the twenties and similarities between these two decades. Investor Sentiment is at all time highs. Interest rates are low, and all seems fine. If you take a look at financial history it is clear that the business cycle flows in and out of trends. The market must correct itself. With speculation nearing all time highs, and confidence†¦show more content†¦One such example, was Henry Ford, founder of Ford Motor Company. Ford’s income in 1928 was 14 million dollars while the average American received wages of 750 dollars a year. Income per capita rose 9 percent from 1920 to 1929, while those with income in the top 1 percent enjoyed a exorbitant increase of 75 percent. (Alexander 2) This tremendous concentration of wealth in the hands of created some interesting problems. This scenario determined that the American economy was vastly dependant on high investment or luxury spending of the rich. This is okay except that high spending and high investments are very susceptible to fluctuations in the economy. These two instruments are much less stable than the alternative population expenditures such as food, clothing, and shelter. While food, clothing, and shelter matter they do not affect the economy as much as investment. The Federal Reserve was created in 1919 to prevent financial crisis and monitor economic activity. (North 7) The Federal Reserve reduced interest rates significantly in the 1920’s. When interest rates decrease investments increase. With rates low companies are more inclined to borrow money. This is because they will have to pay back less interest. This increased capital is used for new ventures, companies, ideas, and factories. This in turn creates more jobs and increased gains. In 1929, the Federal Reserve made a series of aggressiveShow MoreRelatedThe Great Depression Of 19291125 Words   |  5 PagesThe Great Depression The Great Depression began in 1929 and lasted until 1939. The Great Depression was one of the worst periods in the history of the United Sates. Along with the U.S, many other nations around the globe were also affected. The Depression kicked off when the stock market crashed in October 1929. Many investors were wiped out; as a result, people started to panic. The Great Depression brought about unemployment and poverty. The nation was shaken to its foundation. Everyone from richRead MoreDepression Symptoms And Effects Of Depression1497 Words   |  6 Pagespsychopath, sociopath, schizophrenic? What about depression? 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